Report cites poor oversight in IRS targeting of certain groups

Joseph Tanfani and Richard Simon

WASHINGTON -- Lax management oversight at the IRS led the tax-collection agency to target conservative groups for extra scrutiny for more than 18 months, causing some of their applications for nonprofit status to languish for more than three years, according to an inspector general’s report.

Workers at the IRS exempt-organizations division, in charge of screening applications for nonprofit status, selected for additional review groups that included references to the “tea party” -- a decision that wasn’t reviewed by higher-ups at the agency in time, said the report by the Treasury Inspector General for Tax Administration. A copy of the report was obtained by the Los Angeles Times.

The report notes that Internal Revenue Service officials said the criteria were developed by specialists in the Cincinnati office and “were not influenced by any individual or organization outside the IRS.” White House spokesman Jay Carney said Tuesday that the White House had no involvement.

The report, compiled between June and February, says the Cincinnati office “developed and implemented inappropriate criteria in part due to insufficient oversight provided by management.”

Inappropriate criteria were fixed after a top official ordered them changed in June 2011, but the office then changed the new criteria in January 2012 in a way that was also inappropriate, according to the report. Officials in Washington did not intervene to change those criteria until May 2012.

The groups were applying for tax-exempt status under section 501(c)4 of the tax code, under which they are considered social welfare organizations and cannot have political activity as their primary function. The IRS specialists in Cincinnati were reviewing the groups to determine if they were too politically active.

The report looked at records for 298 organizations that the IRS specialists scrutinized for their level of political activity, determining that 96 were pulled out because they had the words “tea party,” “patriots,” or “9-12” in their names, while 202 did not. ("9-12" refers to a conservative movement to restore the national unity felt on the day after the Sept. 11, 2001, terrorist attacks.)

The IRS specialists eventually asked these groups for detailed information, including a list of all donors and the amounts of donations.

The report concludes that IRS workers who developed the criteria didn’t consider the public perception of using this type of criteria in evaluating cases. Another problem: The staff drawing up the questions had a “lack of knowledge” about what activities nonprofits can do under tax law, the report said.